AICS

Il Rischio Politico alla luce della situazione

internazionale: la Aon Political Map 2011

Credit Insurance from Aon UK perspective

18th May 2011

Mark Brincat / Lisa Knall

Main Sponsor Manchester United

Aon Risk Solutions l Trade Credit International l May 2011 1

Overview

Introduction by Lisa Knall

Why do companies buy credit insurance?

UK Credit Insurance market

How attitudes to credit insurance have changed

What is political risk?

The Mena region

Alternative solutions

Questions

Penetrazione Assicurazione Crediti nella UE

Francia

Spagna

Inghilterra

Olanda

Italia

Portogallo

Belgio

Austria

Grecia

Danimarca

Polonia

Finlandia

Svizzera

Germania

Premi in %

sul PIL

Aliq. Fiscali

Sui Premi

Incasso dei

Pagamenti in gg

0,046

0,040

0,068

0,031

0,089

0,018

0,025

0,033

0,031

0,020

0,021

0,030

0,031

0,034

19,00%

9,00%

6,00%

5,00%

7,50%

12,50%

5,00%

9,25%

11,00%

10,00%

0,00%

0,00%

0,00%

0,00%

39

58

47

53

40

72

49

48

42

32

38

41

35

40

• L’Italia è il primo Paese

per ritardi nei pagamenti.

• L’Italia è il Paese meno

sviluppato per quanto

riguarda la penetrazione

dell’assicurazione credito.

•La tassazione dei premi

dell’assicurazione credito

in Italia è la più alta dopo la

Germania

Fonte : Ufficio Studi EH Siac

Aon Risk Solutions l Trade Credit International l May 2011 3

Why do companies buy credit insurance?

Risk protection Financing Credit management SalesR

isk

pre

ven

tio

n

Facilitates access

to improved

financing

Underpins the credit management

function

Directs sales to key customers and

markets

Ris

k tr

ansf

er

Aon Risk Solutions l Trade Credit International l May 2011 4

Lead insurers in the market

Euler Hermes Coface Atradius

Part of AGF owned

in full by Allianz

Owned in full by

Natexis Banques

Populaire

Shareholders:

Groupo CyC (64.2%)

Swiss Re (25%)

Deutsche Bank (9.1%)

Sal. Oppenheim (1.7%)

Argentina, Austria, Belgium, Brazil,

Canada, China, Czech Republic,

Denmark, Estonia, Finland, France,

Germany, Greece, Hong Kong,

Hungary, India, Indonesia, Ireland,

Italy, Japan, Latvia, Lithuania,

Malaysia, Mexico, Morocco,

Netherlands, Norway, Philippines,

Poland, Portugal, Romania, Russia,

Singapore, Slovakia, South Korea,

Spain, Sweden, Switzerland, Taiwan,

Thailand, Tunisia, Turkey, UK, USA.

Algeria, Argentina, Australia, Austria,

Belgium, Benin, Brazil, Bulgaria,

Burkina Faso, Cameroon, Canada,

Chile, China, Colombia, Costa Rica,

Croatia, Czech Republic, Denmark,

Ecuador, Estonia, France, Germany,

Hong Kong, Hungary, India, Ireland,

Israel, Italy, Ivory Coast, Latvia,

Lithuania, Luxembourg, Malaysia,

Mali, Mexico, Morocco, Netherlands,

Norway, Panama, Peru, Poland,

Portugal, Romania, Russia, Senegal,

Serbia, Singapore, Slovakia,

Slovenia, South Africa, South Korea,

Spain, Sweden, Switzerland, Taiwan,

Thailand, Togo, Turkey, UAE,

Ukraine, UK, US, Venezuela.

Aruba, Australia, Austria, Belgium,

Brazil, Canada, Chile, China, Czech

Republic, Denmark, Finland, France,

Germany, Greece, Hong Kong,

Hungary, Iceland, India, Ireland,

Israel, Italy, Japan, Lebanon,

Luxembourg, Mexico, New Zealand,

Netherlands, Norway, Poland,

Portugal, Singapore, Slovakia, South

Africa, Spain, Sweden, Switzerland,

Tunisia, Turkey, UAE, UK, USA.

Aon Risk Solutions l Trade Credit International l May 2011 5

Independent credit insurers

United Kingdom USA Other

HCC

QBE

ACE Europe

Markel

Ducroire

Lloyd’s

Catlin

CIFS

Kiln

Beazley

Chartis

FCIA

CIGNA

Chubb

Exporters

CNA Worldwide

Assur Credit France

Sace BT Italy

Garant Versicherung

Austria

Credit y Caution Spain

Mapfre Spain

CESCE Spain

Zurich Switzerland,

Germany & UK

Equinox Global

Aon Risk Solutions l Trade Credit International l May 2011 6

Underwriting market summary

Aon Risk Solutions l Trade Credit International l May 2011 7

Structures types and options

Whole turnover

insurance

Complete self

insurance

Top up

insurance

Market excess

Aggregate first

loss

Catastrophe

insurance

Syndication

insuranceKey market

cover

ART solution

Buyer select

Single top up

insurance

Use of captive

Third party analysis & trade finance solutions

Aon Risk Solutions l Trade Credit International l May 2011 8

Client purchasing behaviours – how things changed

The financial crisis led to a change in

attitudes

Heightened credit risk awareness

Often perceived as a key boardroom issue

Companies seeking solutions across full

spectrum of receivable management needs

A willingness to invest in credit management

capabilities

Greater focus on TCOR

Willingness to risk share in return for greater

credit limit certainty

A need for a trusted advisor not just a placing

and servicing credit broker

Aon Risk Solutions l Trade Credit International l May 2011 9

Economic

Political

Economic factors look to asses notions of economic balance and sustainability.

Political factors aim to offer an assessment of the overall political situation.

Financial factors generally aim to give an assessment of capacity to service debt as well as financial depth.

What is political/country risk?

Financial

Aon Risk Solutions l Trade Credit International l May 2011 10

Transfer delays

Transfer delays relate to impediments to the transfer of deposited funds. Whereas the buyer may, in good faith, have deposited the funds administrative or bureaucratic delays, economic difficulties or foreign exchange shortages may result in a delay in the transfer of funds to the customer.

Export licence cancellation

Export licence cancellation refers to the arbitrary cancellation or non-renewal of an export licence that prevents the dispatch of goods (in the Customers country).

Natural disaster

Losses resulting from storms, floods, earthquake, volcanic eruption or tidal wave or other forms of natural disaster in the Buyer’s country.

Contract frustration

Contract Frustration refers to action or decisions taken by the government in the buyers country which prevents the whole or partial fulfilment of the contract. While not akin to expropriation, contract frustration may result in a significant reduction in the value of a contract. Covered events may include changes in pre-agreed tariff structures or import licence revocation.

Discharges of debt

The discharge of debt clause relates to the possibility that a loss could occur despite the fact that the buyer has taken appropriate steps to ensure payment. For example, the buyer may have made payment through an appropriate channel (such as a local bank) and therefore have valid discharge of the debt. However, bureaucratic or political factors that cause a delay to the transfer of funds may result in losses if exchange rate depreciation in the intervening period ensures that the deposited funds, when converted, amount to less than the originally contracted payment terms.

Public buyer default

This clause covers the failure or refusal on the part of a Public Buyer to fulfil any of the terms of the contract. A Public Buyer is defined as “an entity that cannot become insolvent”, e.g., a ministry or a state-owned company .

Moratorium on external payments

A moratorium on external payments refers to the possibility that the government is unable or unwilling to provide foreign exchange for payment of external obligations.

Political risk causes of

loss

War

Political risk insurance also covers damages associated with war, revolution, terrorism or general civil unrest.

Political risk causes of loss

Aon Risk Solutions l Trade Credit International l May 2011 11

Aon Trade Credit - Political Risk and Aon Benfield

Aon Benfield

leading reinsurance broker

for credit & surety

in the world

Aon Crisis Management

leading placing broker

in London Political Risk

market

The MENA region

Aon Risk Solutions l Trade Credit International l May 2011 13

MENA region

Economic and social challenges:

– Impact of financial crisis on GCC (Gulf Cooperation Council) was limited except in Dubai

– Failure of predominantly repressive Arab states to deliver good quality of life and services to growing populations

– Urgent need to reform education sector & privatising huge state industries

– Limited safety net for the poor and underprivileged

– Outside the GCC - poor delivery in terms of human development

– Rapidly growing populations pressure on infrastructure, need for large job creation annually

– High dependence in GCC on oil and gas - need to diversify

– The impact of political Islam on society

– The emergence of new media (internet) which is no longer state-controlled

Aon Risk Solutions l Trade Credit International l May 2011 14

Political Risk cover

No cover available

– 11 countries including Libya, Iran, Iraq etc

Offered as standard for companies exporting outside of EEC

CILC only cover

– Congo, Cuba, Pakistan etc – offers cover for Pre Credit Risk

Open account with political risk cover

– Available for most markets

Aon Risk Solutions l Trade Credit International l May 2011 15

What are the alternatives?

Alternative payment methods

– Payment on advance

– Parental guarantee (cross border)

Bank solutions

– Bank guarantee

– ILC, CILC, CAD

Alternative risk transfer

– Receivable puts

– Bankruptcy swaps

– Forfait

– Captives

– Silent confirmation by banks

– Information products - Aon Trade Manager, Tinubu Square

Aon Risk Solutions l Trade Credit International l May 2011 16

Aon Trade Credit - responding to clients’ needs

Aon Receivables Management Solutions – our dedicated credit

management consultancy team.

Aon Trade Captivator – our risk diagnostic platform that provides a total

solution for trade credit exposure management within the captive.

Aon Trade Link – our online portal for customer financial information, risk

and monitoring tools.

Aon Trade Manager – our online credit risk diagnostic tool that gives a

recommended credit limit for each of your customers.

Aon Trade Top-Up – our exclusive “top-up” insurance facility providing

additional excess coverage and capacity.

Aon Buyer Bank – our buyer insight and limit capacity identification platform

Market leading analytical and diagnostic tools to assess your total cost of credit risk

Objective advice and “one-stop-shop” for credit risk management solutions

Unrivalled credit risk management capabilities through The Hub

Project management team to monitor and research product innovation based on your needs

Benchmarking of your needs against industry peers and insurer products

Aon Risk Solutions l Trade Credit International l May 2011 17

Any questions?